Use of software-as-a-service has more than doubled since the beginning of 2006 and will double again by the end of the decade, creating challenges for customers and vendors as they attempt to integrate hosted offerings with on-premise software, according to research released this week by Saugatuck Technology, a business and market strategy consulting firm focused on emerging IT markets.

As companies increasingly used software-as-a-service products for mission-critical applications, integration with in-house software would likely require service-oriented architectures, (SOA) the report said.

"SAAS is going to complicate and hybridize user IT and business operational environments faster, and to a greater degree, than most user and vendor executives understand at this point," Saugatuck wrote. "The vast majority of user IT departments will simply not have the resources to handle the influx of enterprise-level SAAS {expected to occur over the next seven years]."

Saugatuck's research paper, Three Waves of Change: SAAS Beyond the Tipping-Point, is based on surveys of 250 business and IT users, briefings with more than 30 software-as-a-service vendors and extensive interviews with senior executives at 15 companies that use software-as-a-service.

He divides the software-as-a-service adoption trend into three waves. The first wave of early adoption was characterized by cost-effective software delivery involving stand-alone applications. The current phase of mainstream adoption is characterised by growth of business solutions increasingly integrated with on-premise applications.

Saugatuck predicted there would be a third wave of ubiquitous adoption that would begin next year and involve workflow-enabled business transformation, optimised business and IT ecosystems, inter-enterprise collaboration, maturation of the IT utility and of SAAS infrastructure providers.

More than a quarter of companies were using at least one software-as-a-service application, up from 11 per cent at the beginning of 2006, the report said. By the end of the year, Saugatuck predicted software-as-a-service adoption would grow to 47 per cent and that by 2010 it would reach at least 65 per cent worldwide.

"Much of this growth is coming without any sort of plan or management structure," report lead author, Mark Koenig, said in a press release.

he research firm also predicted the average number of software-as-a-service applications used by midsize and large enterprises would reach 7per company by 2010, more than double the current amount.

"Everyone thinks SAAS is a [small to midsize business] phenomenon," report co-author and president and CEO of Saugatuck Technology, William McNee, said. "While that is true, it is crossing all kinds of customers."

The trend of software-as-a-service applications being tightly integrated with business services behind the firewall will necessitate a change in how IT departments view application security, and will lead them to consider "security-as-a-service" vendors, McNee said.

"This is where the security perimeter needs to be extended beyond what is currently managed today, to incorporate new types of applications and services and solutions," he said.